Top 5 stories from HR Dive

It did not take long for federal courts to apply the U.S. Supreme Court’s landmark June 28 decision in Loper Bright Enterprises v. Raimondo overturning the court’s Chevron deference standard.

In fact, on the same day the high court handed down Loper Bright, Judge Sean Jordan cited the decision in his own analysis of the U.S. Department of Labor’s overtime regulations under the Fair Labor Standards Act. Jordan found that DOL exceeded its statutory authority by issuing a salary level test in its final overtime rule that “effectively displaces” the FLSA’s exemption of employees with certain duties from overtime pay.

Jordan temporarily blocked the rule insofar as it applies to state employees in Texas, but despite the limited applicability of his decision nationwide, the rule still faces a number of legal challenges. As such, it constitutes perhaps the first agency regulation on which a federal appellate court will have the chance to perform a post-Chevron analysis, said Alex MacDonald, shareholder at Littler Mendelson.

Chevron overturning has long-term implications

Prior to Loper Bright, federal courts — under the Supreme Court’s 1974 holding in Chevron v. National Resources Defense Council — generally deferred to agency interpretations of ambiguous statutes. “That’s no longer the approach,” MacDonald said. “Ambiguity is no longer enough to trigger deference.”

Instead, the Supreme Court held late last month that courts must “exercise their independent judgment in deciding whether an agency has acted within its statutory authority” in accordance with the Administrative Procedure Act.

The decision could cause a number of DOL’s regulations to fall, according to Paul DeCamp, member of the firm at Epstein Becker Green and former administrator of DOL’s wage and hour division, though employers may not see the effects for some time. That’s in part because the court did not overturn any decisions that were made in accordance with its Chevron holding.

Additionally, the court clarified that Loper Bright did not strike down its 1944 decision in Skidmore v. Swift & Co., in which it held that courts could look to certain “interpretations and opinions” of a federal agency for guidance. This has since been rephrased as a form of deference to agencies by federal courts, MacDonald said, but what the court articulated in Skidmore did not rise to the same level as the deference granted to federal agencies in Chevron.

And now that the government’s “heavy thumb on the scale” has been removed in the form of nixing Chevron deference, courts will not afford special status to the interpretations of agencies like DOL, DeCamp said.

“The longer-term impact is that the elimination of Chevron deference will probably force agencies, including the DOL, to be more thoughtful and judicious in the rules that they issue,” DeCamp said. “In the long run, it will lead to better regulations that adhere more closely to the statutes that Congress enacts.”

Others disagree with that view and are concerned Loper Bright could lead courts to become more involved in policymaking. Jim Townsend, director of Wayne State University’s Levin Center for Oversight and Democracy, said the court’s decision constitutes a misunderstanding of the regulatory process.

“Congress often plays a significant role in monitoring and providing input into those regulations,” Townsend said. The idea that agencies deliberately ignore Congressional intent when making rules “is just not true,” he added. “That’s not the way it works.”

DOL rules may not fare well in federal courts

Another long-term effect for employers to watch is that the back-and-forth nature of regulatory actions between election cycles could be mitigated by the Loper Bright ruling to some extent, DeCamp said.

“Of course when there’s a change of administration, there’s oftentimes a dramatic shift in policy preferences that’s a normal part of the ebb and flow of the elections process. I don’t think that will change,” he added. “But the elimination of Chevron and the pressure it puts on the executive branch agencies to be more thoughtful will help to mitigate this see-sawing effect that we get.”

Few DOL regulations embody this effect quite like the department’s independent contractor regulations, and DOL recently finalized an updated independent contractor rule that took effect in March. MacDonald said he sees that rule as an example of DOL interpreting a statutory term that could be considered ambiguous — the FLSA’s definition of “employee” — in a manner that arguably exceeds its authority and therefore could be challenged in a post-Chevron world.

DeCamp said courts will still need to take into account agency expertise in deciding whether regulations are valid, especially when those regulations concern highly technical or scientific terms. But he also said many DOL regulations issued in recent years would not necessarily fall under this category.

“In light of what the court did, I find it hard to look at any of the regulations that DOL has issued in the past many decades and find any that are based on technical expertise as opposed to policy preference, particularly the Wage and Hour Division,” DeCamp said.

DeCamp added that this does not necessarily mean all or even most DOL regulations are invalid, nor will they be perceived as such by courts. But in the end, “the framework for analyzing those regulations will be much less deferential to the department than has been the case,” he said.

Employers can prepare — and participate

Still, MacDonald said, that does not mean HR should expect controversial regulations to be struck down overnight, and existing compliance obligations still must be met. Instead of regulatory updates, future agencies also may decide to issue subregulatory guidance such as opinion letters, he added.

“We’re not overturning the apple cart now,” MacDonald said. “All of the cases decided under Chevron are still good. You can still trust the federal code of regulations. It’s just that going forward, there’s going to be more close scrutiny over regulations, and you may see fewer of them.”

DeCamp similarly noted that existing federal regulations remain in place, even if employers have the opportunity to challenge particularly vulnerable regulations and submit public comments on proposed regulations; “Employers should not look at Loper Bright as a license to go violate the law,” he said.

Meanwhile, employers also might benefit from communicating with Congressional legislators and, more specifically, committee chairpersons and ranking members, to provide input on statutes as they work their way through the lawmaking process, Townsend said. He added that while it is not solely the responsibility of regulated parties to ensure a more stable regulatory environment, collaboration could help.

“The more that there is a dialogue with those communities [...] the more that a record can be established as to the meaning of the statutory terms and the connection between the statute and the regulation in question,” Townsend said. “Otherwise, we have a void.”

The U.S. Department of Labor split its final rule updating overtime regulations under the Fair Labor Standards Act into two updates yesterday in a move that surprised employer-side attorneys, who told HR Dive the decision could create some tough compliance questions.

Russell Bruch, partner at Morgan Lewis, said the final rule is “unprecedented” in that it implements two separate increases to the FLSA’s minimum annual salary threshold from the present $35,568 set by the Trump administration in 2019.

The first update will take effect on July 1, boosting the threshold to $43,888 per year. Then, six months later, another increase on Jan. 1, 2025, will put that figure at $58,656. A separate mechanism for automatic updates every three years kicks in beginning July 1, 2027.

A final draft of the rule has yet to appear in the Federal Register, but employers are already confronted with the decision of how they should implement payroll changes, Bruch said. If an employee who is currently exempt from overtime eligibility falls beneath the salary threshold as a result of either update, an employer could either convert the employee to nonexempt status and pay overtime or increase the employee’s salary to put them over the threshold.

But that calculus, already a challenge for employers to navigate both financially and culturally, is complicated by the premise of two upcoming increases. Affected employers would need to decide whether to make such changes once in July and once again in January, Bruch said, or to adopt changes in line with the January threshold from the outset. Additional steps include communicating changes to employees, training managers on any updated timekeeping policies and calculating overtime premiums.

Given those changes, “it might make sense for some employers to just do it all at once,” Bruch said, and comply with the projected 2025 threshold rather than implement two separate changes over a six-month span. “Each employer is going to have to evaluate that.”

Complying with the new rule for a period of just six months before another change could prove “very difficult to do,” said Jim Paretti, shareholder at Littler Mendelson. He similarly stated that compliance with the 2025 threshold from the outset could be preferable for employers. “The idea [of doing] this in phases, I don’t think that’s going to be viable for many employers.”

Effect of court challenges

DOL’s motivation for splitting the threshold update into two may in part have been to create a preemptive defense against probable legal challenges, said Brett Coburn, partner at Alston & Bird.

The department specified that its July increase is based on the same methodology outlined for determining future overtime threshold increases set forth in the 2019 rule, but that the 2025 increase uses a slightly different methodology. If a federal court were to strike down the 2025 increase on the grounds that the department’s new methodology is flawed, other parts of the rule could still survive.

“My suspicion is that the folks at DOL wanted to make sure that ‘we have something that we think might stick,’” Coburn said, but he added that this is uncertain.

Both Coburn and Paretti said that the department could face a challenge similar to that which it faced under the Obama administration. In 2016, a federal judge enjoined an overtime rule that would have pushed the threshold to $47,476 per year.

“I think there’s a much more significant chance that the rule does survive at least on the lower threshold,” Coburn said. “It moves from a binary guessing game of ‘Is it going to survive?’ to, ‘Is it going to survive in whole, in part or not at all?’”

Regardless of how employers approach the potential for legal challenges, the current moment presents an opportunity for employers to revisit their exemptions more broadly, Coburn added. The final rule does not make changes to the “duties” test for overtime eligibility under the FLSA, but “now is as good a time as any to make sure we’re properly applying the duties test,” he said.

On July 19, a software glitch live for only 78 minutes led to global turmoil. The incident, eventually traced back to an early-morning software update by cybersecurity firm CrowdStrike, led to outages for some 8.5 million Microsoft Windows systems running the company’s Falcon threat detection and prevention platform, Cybersecurity Dive reported.

Organizations worldwide were affected. Airports effectively came to halt, while a number of major banks faced disruptions ranging from employees being unable to access their work stations to consumers being locked out of digital accounts. By extension, the outage also disrupted payroll operations for some employers.

Tsvetta Kaleynska, founder and CEO of RILA Global Consulting, said that moving money across bank accounts became “impossible” during the day of the outage, leaving her temporarily unable to pay employees of her small business. The glitch also affected software vendor Docusign, which RILA uses to complete contracts; RILA lost out on a “huge, huge contract” with a client that could not be signed due to the outage, Kaleynska said.

RILA eventually got employees paid on the morning of July 20, she continued, but the outage served as a reminder of the tangible effects that result when things go wrong in a business world heavily dependent on software.

“It highlighted the huge dependence on systems and software for operations and revenues for small business leaders like myself,” Kaleynska said of the CrowdStrike incident. “It felt like a huge blow to small businesses.”

A case for business continuity planning

In some ways, it may take time for businesses to assess the full damage of the CrowdStrike incident, said U.K.-based payroll consultant Ian Giles. Organizational pay cycles vary widely depending on factors such as geography and pay frequency, and Giles said Friday is a popular day for businesses to make payments to workers.

Add in the fact that more and more employers choose to schedule payroll transactions days in advance, leaving the process to occur more or less automatically on payday, and “there’s every eventuality that people did not get paid” on the day of the outage, which fell on a Friday, Giles added.

Organizations including the Global Payroll Association and PayrollOrg — the latter of which formed last year as a merger of the American Payroll Association and the Global Payroll Management Institute — have raised this exact possibility. Even organizations who don’t use CrowdStrike may have been affected if their vendors do, said Curtis Tatum, in-house counsel and senior director of federal payroll compliance at PayrollOrg.

Unlike previous cyber incidents affecting payroll, such as the late 2021 Kronos outage, the CrowdStrike outage does not appear to be the result of a targeted cyberattack — a potential silver lining, Tatum said. Major U.S. payroll service providers have not reported any service disruptions publicly, he added, but the situation is still fluid. Giles likewise said that the situation “seems to be very quiet” as far as payroll providers are concerned, but he also said that this could change within the coming weeks and months.

However, one takeaway is that employers should have stress-tested business continuity plans for cyber incidents that include every single person who is involved in the payroll process, Giles said.

“Don’t just make sure you have a plan in place,” he continued. “Make sure it is regularly tested.”

In some cases, payroll vendors themselves may have their own versions of such plans, and employers can incorporate those directly into their continuity planning. “If what they have is already written, get it,” Giles said. “Make it a chapter of yours.”

Tatum said he also recommended that employers work collaboratively with vendors to ensure preparation for similar incidents and to build relationships with vendors that allow for such information exchange if they have not already done so.

Employers also might want to consider having a physical backup of their payroll, he noted, a strategy that helped some employers during the Kronos outage. While this approach can be expensive, “it’s good to have” in the event that employers are unable to access an electronic backup altogether, Tatum said.

‘It becomes serious stuff’

Beyond business continuity, employers also may need to consider how they will keep employees informed in the event of a payroll glitch.

“The overriding lesson to me is a reminder of the need for communication with employees to let them know what’s going on,” Tatum said. He added that HR teams can work with management and any outside organizations involved in payroll “just to have all the information you can provide to allay fears as best you can.”

Giles said the incident is a reminder that contingency planning may be more complicated in a hybrid or remote work environment, which could mean that employers need to take additional steps to make their contingency plans accessible.

“What would have happened Friday to one of these top businesses if their business continuity plan was on a server that was inaccessible?” he said. “It’s okay having it, but consider printing it or having it offline somewhere.”

Employers should also ensure as much as possible that employees and teams are attuned to potential technology issues, whether the fault lies with server errors, malfunctioning laptops or uncharged batteries, Giles added.

“Payroll is the absolute epicenter of every business,” Giles said, as errors can cause damage both for employees who are unable to afford their bills as well as for employers who suffer reputational damage for missing pay days. “It becomes serious stuff.”

With engagement on the downswing even as the end of 2024’s first half nears, nontraditional employee benefits emerged as an area of opportunity for employers, HR Dive’s 2024 Identity of HR survey found.

The most popular of these options, remote and hybrid work programs, were cited by more than half of the 490 respondents as part of their talent strategies last year. That finding comes amid a seeming normalization of hybrid work for jobs that can be done at least partly remotely. According to Gallup data, 54% of full-time U.S. remote-capable jobs were hybrid jobs in February 2024.

Other programs addressing areas such as mental health, educational attainment and commuting also saw an uptake alongside traditional, core benefits like health insurance, retirement plans and bonuses.

The push for nontraditional benefits may speak, in part, to employers’ need to address employee well-being, which has stagnated globally, said Diana Scott, leader of The Conference Board’s U.S. human capital center. An April report from the organization found that 62% of U.S. workers said their well-being is the same or worse than it was six months ago — a warning sign given 84% said they saw employers as at least partially responsible for their well-being.

Flexibility: The most valuable benefit?

As The Conference Board dove deeper into the factors that influence well-being, it found that support for flexibility at work is one of “the most useful among a wide array of options,” Scott said. That’s because it can help employees feel in control of their work and personal lives while improving retention.

For office-based work specifically, hybrid work has become “the way it has to be if you want to optimize effectiveness and enjoyment of work,” said Debbie Lovich, managing director and senior partner at Boston Consulting Group. “I almost view it as not a benefit,” she continued. “It’s almost like it’s just the right thing to do.”

Data from WFH Research showed that, between December 2023 and March 2024, hybrid work was the most common work arrangement for employees who could work from home. Only 35% of such employees were working fully on-site.

But even for those whose jobs demand that they be on-site, employers have options, Lovich said, such as flexible shift scheduling. Other forms of flexibility include sabbaticals and mental health time off, Scott said.

These offerings require implementation efforts from all corners of an organization rather than the compensation and benefits department alone, according to Sander Domaszewicz, senior principal and national practice leader for consumerism at Mercer. To encourage flexibility, organizations have to spend time “getting into how the work is done” and ensuring managers create the right work environment, he said.

Employers have several considerations to make to ensure managers are prepared to lead dispersed teams, from choosing communication platforms to setting norms around in-office time and deciding how and when teams collaborate. “Very often, when employees are comfortable with hybrid options, it’s because leaders are comfortable managing hybrid teams,” Scott said.

Addressing budgetary concerns

Modern employee benefits strategy aims to find offerings that are highly valued by employees, said Domaszewicz, which is why employers have taken a chance on more niche perks like on-site electric vehicle charging and college coaching benefits for dependents.

Sometimes, the financial return on investment of a given benefit is not always as clear as the cultural return on investment, he added. But employers also do not necessarily need to spend big in order to add benefits employees find meaningful.

“You can offer the benefit in a voluntary way, as a partially paid program or raffle it away,” Domaszewicz said. “You don’t necessarily have to buy everything on paper in order to offer a benefit.”

Feedback leads to better benefits

To that end, employers could approach benefits program design differently by leaning into the idea of treating employees like customers, said Lovich. “When [employers] serve customers, they do deep discovery to understand their needs,” she said. “Yet, when it comes to employees, we treat them all the same.”

Sophisticated organizations take time to better understand employee needs across diverse segments, tailoring benefits offerings in turn. Whether an employer has a large LGBTQ+ population, a large caregiver population or other demographic group, it may require different forms of individual benefits to develop a better program.

Lovich gave the example of one manufacturing industry client with a largely immigrant workforce that struggled to tailor its health benefits. For this population, in which employees were often caregivers for cousins and other extended family members, Lovich said the client adopted a “household health benefits” model.

HR should keep constant communication with employees about benefits to ensure they feel valued and supported, Verlinda DiMarino, VP and head of benefits at Liberty Mutual, said in an email. Liberty makes use of surveys, benchmarking tools and data to understand what resources are most meaningful, she added.

“Our evaluation may indicate that a benefit is redundant or ineffective, and we will streamline that program to reinvest in new offerings,” DiMarino said. “This allows employees to feel like their insight matters and that we’re meeting their direct needs.”

Communication also ensures awareness of helpful offerings, and employers should confirm that managers are exposed to benefits early on, Domaszewicz said. Managers can be “champions” for specific benefits that they have found personally helpful, he added, which could help their teams understand the value of those benefits and feel comfortable using them.

At the end of the day, HR cannot bear all of the responsibility for ensuring that benefits, traditional or nontraditional, deliver expected value, according to Lovich. Executives, managers, vendor partners, employee-led groups and other stakeholders all play a part.

“Satisfying employees shouldn’t all be on HR’s shoulders,” she said.

CHICAGO — The HR profession is facing a “polycrisis,” SHRM CEO and President Johnny C. Taylor Jr. said Monday in the Society for Human Resource Management’s annual conference opening session, outlining a formidable set of challenges the profession faces in the coming years.

The message comes when workers and managers are already drained and may be enjoying relative calm. After the first years of the COVID-19 pandemic and the racial reckoning sparked by the murder of George Floyd, HR pros may feel the most significant societal disruption in years has passed, Taylor said. 

But even bigger disruptions are coming, Taylor asserted: “A storm is coming for HR.”

The need for upskilling

Taylor pointed first to an education system that he says isn’t keeping up with the demands of the workforce. He took issue with the state of K-12 curriculum, and said the pandemic was a “wrecking ball into U.S. public education.”

Students have fallen behind in math and reading skills, and chronic absenteeism is a lingering problem post-pandemic. As a result, students will graduate even more ill-prepared for the workforce than they currently are, with deficits not just in reading and math but also in essential professional skills like critical thinking, problem solving and adaptability, Taylor said.

At the same time, with changes in technology and other advancements demanding new skill sets, “we’re asking more of our workers than ever before,” Taylor said. “We’re asking them, in short, to be superhumans.” 

“What education can’t do, HR is now going to have to do,” Taylor said. High school and college graduates will need to be put on a learning pathway to develop their skills, and older workers — the fastest-growing segment of the workforce, he noted — will need targeted training as well. 

The volatility of AI

The rise of artificial intelligence — and the transition to its widespread use in the workplace — is another challenge facing the HR profession, Taylor said. He cited data showing that currently, only 12% of HR pros and 15% of workers believe organizations are using AI effectively.

If used correctly, AI could be a “golden opportunity” and “an enhancement for the workforce, Taylor said. But that requires HR to shelve its defensiveness, and to join every conversation about AI in the workplace. The need is urgent, Taylor said, as the AI revolution in the workplace is inevitable, not a “maybe.”

The future forecasters project that AI will be everywhere within just a few years, Taylor said — and the proliferation of AI-driven jobs will be one of the most volatile social and political issues of our time. “This is what keeps me up at night,” he said. 

“Thirty percent of the world’s workforce will be made jobless because of AI in the next 7 years,” Taylor said. “Wall Street is literally salivating over the cost savings that they can get out of having fewer employees.” While new jobs will be created, Taylor said, there won’t be anything approaching one-to-one parity. 

HR must “run headlong into this issue,” Taylor said, promising SHRM would be fully in the mix as policymakers make decisions about the AI deployment and policy — no matter what political party or leader is running the show. He also pointed to the organization’s new chief data and insights function and to a wealth of resources SHRM is pouring into AI research. 

An increasingly uncivil workforce

Finally, Taylor said civility is under threat at work, noting that while people generally are similar and want the same thing in the grand scheme, “things have gotten ugly” in the workplace. “We’re as diverse as we’ve ever been but as divided as we’ve ever been,” he said.

Taylor pointed to SHRM data that two-thirds of workers have witnessed or experienced incivility in the past month — and that most don’t think HR can or will do anything about it. 

Widespread incivility is more than a culture issue, Taylor noted. Conversations the organization has had with the U.S. Equal Employment Opportunity Commission have suggested uncivil behavior is a “gateway drug” to workplace harassment, leading to compliance issues as well.

What happens at work can profoundly influence people and HR pros are “in a special position” to set the bar for workplace civility, Taylor said.

Overall, Taylor said, HR has its “work cut out for [it]” in 2024. “I’m asking you to … choose the courage to run toward the storm.”